Representatives from the Mills College Lokey School presented data from its recent ‘business conditions’ survey to our City Council on Tuesday. The study confirmed what restaurant owners warned when the ordinance was hastily passed in 2015. They are struggling, rapidly raising menu prices and increasingly looking to leave.

Unlike the 2016 Mills study that might have been premature and diluted the data by lumping ‘white-collar’ businesses with service jobs, this study was more comprehensive and provided a break out of data from the food service sector.

It’s getting harder to find small food service businesses that were around in 2015 when the MWO was passed. Emeryville institution Bucci’s, Commonwealth, Farley’s, Scarlet City … all gone. In fact, nearly all the brick & mortar businesses that comprised the short-lived Little City Emeryville small business advocacy group have moved, folded or sold. Only The Broken Rack and Paula Skene Designs (a greeting card and stationary company) remain in Emeryville.

These small businesses actively lobbied for a local study factoring in our city’s unique geography, business models and circumstances prior to the ordinance’s passing, but were denied.

“The findings indicate that while the retail industry has been quite resilient while implementing the new labor ordinances and has suffered no major adverse effects, the restaurant industry is clearly struggling.”

Formula Retail ‘Resilient’

The formula retail sector was described in the summary as ‘resilient’ and “suffered no major adverse effects,” The data also noted that more people were applying for these jobs in our city, but did not indicate if they were driving from farther distances to pursue them. Not surprisingly, the survey showed that employees were generally pleased with getting raises.

Damning Data for Food Service Industry

The survey also identified that “the restaurant industry is clearly struggling.” Specifically, small, independent, non-franchise establishments are having the most difficulty. Comments from those surveyed (pages 62-67), might reflect the sentiment of local business climate most accurately.

Data detailing these struggles noted:

23% of food service businesses plan to leave Emeryville ‘in the near future’

48% combined had a ‘negative’ opinion of the ordinance and many within the 27% ‘other’ category expressed negativity

Local businesses continue to get hammered with negative reviews for higher prices passed along to consumers

The E’ville Eye has captured the restaurant closures since 2015 in this interactive map:

“Fight for $15” Achieved in 2018

The ‘Fight for $15’ campaign blazed through Emeryville in 2015. While even activists expressed contentment with the adoption of a regional minimum wage model that established a ‘path’ to $15, the then city council pursued its highest-in-the-nation ‘living wage’ model.

They argued that this would reduce poverty levels by eliminating reliance on government programs, low-wage earners would be able to live closer to their jobs and an economic ‘multiplier effect’ where these earners would offset any loss in business by contributing back to the local economy.

Supporters dismissed threats of job loss, impact on youth employment, reduced shifts and increased automation as ‘bluff’ by business owners. It’s worth noting that none of these talking points were addressed in the Mills Survey.

The MWO hasn’t completely stopped the opening of small food establishments. Best Coast Burritos is one notable business that opened after its passing and appears to be thriving. Yuzu Ramen replaced Bacano Bakery, Patatas Kitchen replaced Commonwealth and Hometown Heroes replaced Propaganda.

It’s notable that nearly all the new businesses that have opened have embraced the counter service model that requires fewer employees. Paradita Eatery, whose original plan was for a full service sit-down restaurant, cited Emeryville’s wage ordinance specifically for ‘pivoting’ to a counter service model. Counter service models require fewer employees to offset higher labor costs.

“If we don’t have a profit margin that makes it viable for us, we’ll leave,”
— Townhouse Bar & Grill General Manager

The only full service restaurant that has opened since the Minimum Wage was passed was 612One Asian Fusion which folded after just two years in business. The former Elephant Bar space at Bay Street has sat vacant since 2016 amid rumors that Cheesecake Factory was considering leasing the space only to withdrawal after Emeryville passed its “Fair Work Week” ordinance.

One of the most outspoken full-service restaurants has been Townhouse General Manager Jeffrey Kroeber. Kroeber has warned the council for years that the wage scale was unsustainable for his business and that every $1 increase led to a $200,000 increase in their payroll. A payroll increase that would have to be offset by a $650-$700K increase in sales to maintain margins. “If we don’t have a profit margin that makes it viable for us, we’ll leave,” he explained at a recent small business forum. “Unless there’s a tipped employee credit, it ain’t gonna happen!”

A chart created in June, 2016 showed how ambitious Emeryville’s wage increase schedule was. Supporters have credited Emeryville for helping push wages up in the region. The City of Berkeley has since accelerated its minimum wage schedule.

Scheduled Increase to $16.30/hr. on July 1st

While the survey confirmed what Emeryville businesses have been screaming about, there will be no relief for them as they look to absorb their largest hike since the ordinance was passed. For the last three years, their minimum wage has increased between $.75 and $1 per hour. This year, it is scheduled to increase by $1.30.

The wage was forecast to be near $16/hr. but the Consumer Price Index increased more than expected and the final calculation was an unexpected $16.30 (currently at $15.69/hr. for “Large’ businesses over 55 employees and $15/hr. for ‘Small’ businesses under 56 employees). The wage will continue with an annual CPI increase that commonly varies between 2-4%.

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2019 is the year where small business and large business wage schedules will ‘merge’ and there will be no distinction moving forward. Emeryville’s ‘small business’ threshold of 55 employees was selected somewhat arbitrarily by Councilmember Dianne Martinez instead of the staff recommended 50 employees so that a popular local restaurant at this threshold ‘could grow.’ It’s worth noting that this restaurant has in fact retracted from 50 to 37 employees since this ordinance was passed.

Neighboring Oakland’s minimum wage increased on January 1st to $13.80/hr. and Berkeley’s is expected to reach $15.59/hr. in July. Berkeley’s ordinance contains a slower ramp up for youth workers in government and non-profit sectors.

Small Businesses Make ‘Last Stand’

Data from the survey was presented to Council at Tuesday’s council meeting [1:28:14]. While the handful of council meeting mainstays provided their standard support, a few small business owners and supporters expressed their concern and frustration.

“I feel aggrieved about this process,’ noted city Economic Development Advisory Committee (EDAC) member and Broken Rack co-owner Marilyn Boucher. Boucher expressed frustration with the ability to present the data and impacts prior to the scheduled $16.30 increase. “This is killing us.” Boucher went on to explain the ‘mutiny’ businesses have to stave of because of the flattening of wages between new hires and longtime employees.

“You’re going to be left with all the large corporations and everybody else you can get in any city. It’s part of the character of the city.”

“Small, independent businesses are going to disappear,” pleaded Rudy’s Can’t Fail Cafe General Manager Doug Smith. “You’re going to be left with all the large corporations and everybody else you can get in any city. [Small Businesses] are part of the character of the city.” Smith went on to question why Emeryville’s wages were higher than New York, Los Angeles and San Francisco’s.

One commenter, who identified herself as a resident, questioned why the survey did not include consumer data noting her dining frequency was altered by the drastic price increases she’s observed. “I still go to The Gap because they did not raise their prices.” She noted that she used to frequent her local Doyle Street Cafe 2-3 times per month but last year went only twice. “We don’t work in tech, we don’t have high incomes,” adding that she now goes to the Public Market where prices are more reasonable.

Once franchise owner noted that the price increases they’ve been forced to pass along have ironically had the biggest impact on vulnerable communities that are more price-sensitive. “Our largest decrease in guests are folks over 50. Obviously our elderly, disabled, and folks on fixed incomes are unable increase their income to compensate for the price increases.”

Council Considers Minimum Wage ‘Pause’ for Indie Restaurants

Council deliberated on the data and, surprisingly, Mayor Ally Medina expressed concern with some of the data and the planned $1.30 increase. “That’s a significant increase,” she noted.

Councilmember Bauters stepped up by addressing the elephant in the room. “Solving economic hardships of people in our community is not going to be done by picking one way,” he noted pointed to our housing affordability as a primary driver of poverty levels. “One of the important things that policymakers have to do is they have to review their policies.” Bauters pointed out a multiplier effect on our hotels if our ‘culturally significant’ restaurants were to close making staying in our city less desirable. “If Trader Vic’s and the Townhouse close, the BCDC is not going to re-permit something else at the site of Trader Vic’s nor is anyone going to take a 30,000 square foot sit down restaurant.”

“One of the important things that policymakers have to do is they have to review their policies.”
— Councilmember John Bauters

Councilmember Martinez expressed support for the idea if the focus could be narrowed to just local, independent food service businesses. Councilmember Patz, the lone dissenting vote, largely dismissed the data and small business concerns. Patz also noted he looked forward to the next recession to codify the data. “I’m really excited to see what it looks like in a few more years particularly when we go through an economic downturn.”

The motion passed 4-1 to add the agenda item to the May 21st council meeting and schedule a special meeting for May 29th. Any amendment to the ordinance would have to be passed 30 days prior the scheduled July 1st increase in order to meet legal requirements.

Review the full report below:

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About The Author

Rob Ariasis a third generation Californian and East Bay native who moved to Emeryville in 2003. A new parent in the community, he can often be seen walking his French Bulldog rescue "Fiona" around his Park Avenue District neighborhood, traversing the greenway on his bike or enjoying his favorite Emeryville small businesses. Rob's "day job" is as a creative professional.

Isn’t this exactly what all the small, local businesses predicted would happen?

And didn’t Ruth Atkin, Dianne Martinez, Scott Donahue, Jac Asher, and Nora Davis ignore them because a group of labor lobbyists from San Francisco showed up? Didn’t Jac Asher rush the process through without concern for local businesses? Didn’t everyone ignore the calls by the local businesses for an economic study which would have revealed that this would happen?

Weren’t all but two of the city council unwilling to speak out against the labor activists who were showing up at local businesses and harassing any small business owner who spoke out for a lesser increase? Didn’t the spokesman for the SEIU personally write demeaning emails to one of our local women-owned businesses?

Didn’t the brother of a current council member have to be thrown out of multiple local small businesses after verbally harassing their owners in front of staff and customers? Doesn’t that same blogger, to this day, maintain a blacklist of local businesses that lobbied for an increase to the minimum wage that would have protected local workers?

Didn’t Dianne Martinez say that the small business owners who were about to lose their businesses should just “get creative” to solve all the problems?

Didn’t a current City Council member fail to speak out against the minimum wage because it was politically inconvenient and later quietly made his only contribution by suggesting that employees should be able to call in sick if their service dog was ill?

Didn’t four of the five members of City Council show up at a Fight for $15 Rally prior to the very first vote on the ordinance in violation of the Brown Act?

Didn’t thousands of workers lose their jobs all over Emeryville because a couple of council members wanted to make national headlines?

Or should we just forget what was done to local businesses, to their workers, and to the local community?

Thanks to Ally Medina for standing up and taking action. Given her relationship to the SEIU, it is downright courageous and heroic for her to make this stand on behalf of local, small businesses and the entry level workers of Emeryville.

The real question now is whether there will be the courage to address the issues raised by the study. Will the City Council roll back the minimum wage to a more reasonable level that can sustain locally owned restaurants? Or will it take the easy way out and just avoid making things even worse by pausing the increases until everyone forgets about the study?

(And a correction, the amendment and a rollback of the minimum wage would not have to be passed 30 days before the increase. The MWO can be amended at any time. But doing so before the next increase would just avoid the issues caused by rolling back changes after they take effect.)

If the cost of rent for these small businesses weren’t so high, they could afford to pay their employees a decent living wage. Prices for their food go up to make up for the cost of rent. Unless we get to the root of the problem, these issues will never change

Rent is not the core issue for a small restuarant: 20 employees x 40 hours per week x 4 weeks at $16/hour + taxes = $56,320 per month for a relatively small business. And that excludes the additional increase for all of management that has to escalate above this as well as insurance which scales with salary and any benefits.

In order to decrease rent, you’d need to massively increase the supply of available units through extensive rezoning and high density development. I’m all for that, but then you’re up against the NIMBY’s, and even if not for them any relief from rent deceases isn’t going to be enough to counteract such massive wage costs.

Increasing supply is a fine idea, but its effectiveness still depends on getting Emeryville’s crazy high minimum wage under control.

The solution here is simple, and fortunately some of the council seem like they are already on the right track: just exempt small business food service from the MWO altogether. The state minimums are sufficient. Tiny little Emeryville does not need to be leading the charge here. Doing so is only going to cause irreparable harm to the local economy.

I applaud John Bauters for acknowledging that policy makers need to temper their grand intentions with realism, and revisit poorly performing policy.

They should look to exempt all small businesses from the MWO and let them fall under state law. This was actually one of the original suggestions from the small business community. If the small businesses aren’t providing a service to their employees (either scheduling flexibility or experience or a path upward), they will lose the employees to the bigger companies at the higher wages, but they will be able to do what they’ve always done and hire and grow by doing the things small companies do…supporting employees, hiring those with less experience, and providing flexibility.

The fact that the study divided retail out from food service is actually just a separation of large and small businesses in Emeryville. Most of the restaurants in Emeryville are small businesses. Most of the retail are very large businesses. The little manufacturing companies, service businesses, and small retail have had the exact same issues as food service, and they were also part of the contingent of small businesses who came out to speak against the MWO.

So, to say the retail was able to absorb the cost in Emeryville was really just to say that large businesses can absorb the cost. The impact on Ikea with a non-stop deluge of people paying $100-500+ for every 60 seconds of cashier time is nothing. The impact on the little guy assembling suspenders or shipping hand made greeting cards is massive.

Emeryville should just pull the plug on the MWO for all businesses under $5-10M revenue or under 55 employees and fall back on CA state law.

Small businesses will be able to compete again, will have a small leg up to fight against the larger companies, and the employees will get to $15 anyway under state law.

And Emeryville will once again be a good place to be a small business. And perhaps a place where the small businesses can support those on the City Council again…

Totally agree small/large business vs. restaurant/retail. However, Emeryville is a test case for ALL California as Min Wage will soon hit $15. Even if CA allowed a Tip Credit, at $15 Min Wage, there is no relief. The “non-Corporate small to medium sized full service restaurant” is an endangered species. CA does not have a clue or a plan. Our part of the restaurant industry, our part in our communities, our contribution to our local cultures, our employees and their families are all riding the Titanic. My advice? Grab a seat by the band!

For several chains, the exact same food and goods are cheaper 4 miles away. Now we stop at them while commuting – to save $0.20, etc. per item – but also out of spite to the socialists on the E’ville city council. We want to starve those monsters of sales taxes.
Also – “higher pay” includes tips which many of us have reduced since we are paying for the level of service we receive. Just like the mandated healthcare surcharge at SF restaurants – if we used to give 15% or 20% – now we reduce our tips by 6%. But – I admit we use the list of restaurants who opposed the MWO to narrow down our choices in Emeryville.

Actually I did not use the word “mutiny ” in my remarks to the Council. I spoke about morale. I addressed the survey results showing both increasing morale and decreasing morale. I pointed out that tipped employees who were already the highest earning restaurant employees despite working at minimum wage were naturally happy to have their wages raised every year. Non tipped staff previously with higher wages but lower earnings were naturally unhappy to see the gap between their wages and that of tipped employees shrink, or disappear, as owners lacked the means to increase wages for everyone at an equal rate.

Sorry if my paraphrasing didn’t quite capture your sentiment. It’s something I’ve consistently heard from small business owners so I may have conflated the issue of employee morale and resentment between employees that hustle and have years of experience and how they make nearly the same as those that do not/are without. Basically, owners can no longer provide pay incentives to work harder and it creates complacency.

Rob thanks as always for your excellent reporting. It’s a shame that cool local eateries are being burdened by a policy that seems more driven by ideology than data. Emeryville is not a economic island so to impose a higher wage burden in our little burg was bound to have unhappy consequences. Also when someone feels compelled to write lengthier comments than even the original story, some of which I agree w, I suggest they have the good manners to share them by other than “anonymous”..

Thanks Kevin. Unfortunately, we live in a small city with a history of corruption where we’ve seen affiliates of our city council harass, intimidate and attempt boycotts of those that speak out against their positions. Members of our council openly retaliate against those that are outspoken by denying them grants and committee positions. Anonymity is unfortunately necessary to allow people to speak freely. If a small business owner is outspoken, what do you think the outcome will be next time they apply for a facade improvement grant, cabaret license or building permit?

It is neither safe nor wise to speak out publicly as a small business owner against Emeryville’s City Council.

The prior city council was asked to publicly condemn the intimidation and harassment of small business owners who spoke out during the MWO. Jac Asher, Dianne Martinez, and Scott Donahue wouldn’t do it.

It is not a safe place to do business. The person quoted in the article was actively and repeatedly harassed by the brother of a council member. Long after the MWO was done, he stood outside her small business a harassing her customers. He maintains a blacklist on his web site encouraging readers to boycott any business who spoke out (and particularly the women owned businesses and only small local businesses).

If you are looking to start a small business, go elsewhere. This is no longer a good place to run a business and not worth your time or your energy.

Trust me. The small businesses would love to be able to be heard and to use their names. They cannot.

Yes. We covered that yesterday. We are thrilled to have Minnie Bell’s planting roots in our community. There are so many obstacles for food Entrepreneurs these days and La Cocina and The Public Market helped Fernay overcome some of them. We’d like to see the city tilt the landscape in favor of small businesses and avoid being known as a homogenous town of malls. When you stack higher labor costs with already high rents and throw in high crime, growing homeless and low parking turnover … this is not a climate that will convince more to risk their life savings and set up shop in E’ville.https://evilleeye.com/in-the-neighborhood/public-market-updates-minnie-bells-signs-multi-year-lease-mama-lamees-middle-eastern-pop-up-announced/

We should lower the minimum wage to $1.00 per hour. Imagine how many restaurants would be dying to get into Emeryville so they could line their pockets with all that money! A virtual goldmine.

Sure, it’d be at the expense of the very people who actually provide the service, who often drive from hours away and sleep in their cars, but the owners need a big fat check! As do the greedy landlords that soak us all.

The point being, if minimum wage has not kept up with inflation, why is it moral or fair to exploit your employees to increase profits?

From today’s Post:

“Owner Alan Beatts couldn’t retain staff, even with a $15 minimum hourly wage. Who can live on $15 an hour in this city transformed by innovation?

How can Alba Guerra, co-owner of nearby Sun Rise restaurant, continue to charge $10.95 for the housemade vegan chorizo platter after her rent spiked 62 percent last year to $7,800 a month?”

Why not “we should raise the minimum wage to $100.00 per hour. Imagine how many workers would be dying to get into Emeryville so they could line their pockets with all that money!”

Because you understand all wages are passed on to us via prices. And you understand that corporations, and their executives, are taxed on profits progressively. And you understand executives use those wages to eat out which provides employment opportunity. And the two empty stores at Powell Street Plaza mean the owners will not make as much money and therefore pay lower taxes. And you understand the empty stores at Parc on Powell, the empty “new seasons market” on Shellmound, etc., etc. are “soaking” the greedy landlords. Well, maybe you don’t understand since you probably voted for the city council socialists who accept bribes from the unions.

Over the past 25, 50, 75 years the standard of living has dramatically increased compared to wages. Obesity is a far bigger problem than hunger. Walk through Pak-n-Save, look for half eaten produce on the shelves (i.e. lost profits) and also compare the cost per calorie of a bunch of broccoli compared to a bag of Doritos.

Minimum wage was not intended to provide a living wage. Open borders have squeezed the youth of America out of the opportunity to learn the important skill of showing up every day, on time, and getting their hands dirty.

We haven’t had the opportunity for a follow up story on this yet but basically, council rejected the original ‘pause’ ordinance but approved a slower path for indie restaurants that would slow the “merge” until 2027 (3-2, Medina & Patz voting “no”). This would apply to about 50 small food service businesses in town. A second reading scheduled for 5/29 would need to be approved in order for this to happen.